Related papers: Risk averse fractional trading using the current d…
The autonomous trading agent is one of the most actively studied areas of artificial intelligence to solve the capital market portfolio management problem. The two primary goals of the portfolio management problem are maximizing profit and…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
This paper develops the first closed-form optimal portfolio allocation formula for a spot asset whose variance follows a GARCH(1,1) process. We consider an investor with constant relative risk aversion (CRRA) utility who wants to maximize…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
We propose a consumption-investment decision model where past consumption peak $h$ plays a crucial role. There are two important consumption levels: the lowest constrained level and a reference level, at which the risk aversion in terms of…
Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We establish structural properties of optimal stopping problems under time-consistent dynamic (coherent) risk measures, focusing on value function monotonicity and the existence of control limit (threshold) optimal policies. While such…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
A fractional diffusion equation with advection term is rigorously derived from a kinetic transport model with a linear turning operator, featuring a fat-tailed equilibrium distribution and a small directional bias due to a given vector…
We study the optimal investment stopping problem in both continuous and discrete case, where the investor needs to choose the optimal trading strategy and optimal stopping time concurrently to maximize the expected utility of terminal…
We study a linear-quadratic, optimal control problem on a discrete, finite time horizon with distributional ambiguity, in which the cost is assessed via Conditional Value-at-Risk (CVaR). We take steps toward deriving a scalable dynamic…
The optimal stopping problem is a category of decision problems with a specific constrained configuration. It is relevant to various real-world applications such as finance and management. To solve the optimal stopping problem,…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
Optimal execution of portfolio transactions is the essential part of algorithmic trading. In this paper we present in simple analytical form the optimal trajectory for risk-averse trader with the assumption of exponential market recovery…
The aim of this paper is to exhibit a necessary and sufficient condition of optimality for functionals depending on fractional integrals and derivatives, on indefinite integrals and on presence of time delay. We exemplify with one example,…
Optimal multi-asset trading with Markovian predictors is well understood in the case of quadratic transaction costs, but remains intractable when these costs are $L_1$. We present a mean-field approach that reduces the multi-asset problem…
We consider a collection of derivatives that depend on the price of an underlying asset at expiration or maturity. The absence of arbitrage is equivalent to the existence of a risk-neutral probability distribution on the price; in…